Affordable Housing to become Rs 6.25 lakh crore market
Demand for affordable homes is set to stay healthy, with the market poised to hit the Rs 6.25 lakh crore mark by 2022, supported by a growing population, young demographic profile, shift towards nuclear families and rapid urbanisation, according to rating agency ICRA.
“The housing shortage is expected to increase from the current level of 19 million units to 25 million by 2021, based on a stable decadal growth rate. Assuming an average ticket size of Rs 25 lakh per unit, this translates into a market potential of Rs 6.25 trillion (lakh crore) for affordable housing projects,” said K Ravichandran, group head, corporate ratings, ICRA.
Limited supply in low cost and affordable housing segments, largely being catered to by the government undertakings or the smaller and unorganised developers, has resulted in an acute shortage of housing. Various incentives to homebuyers targeted at the affordable housing segment are expected to further augment the demand, according to ICRA.
Shubham Jain, vice president, ICRA, feels the pricing and thus the ticket size of the units limit the headroom available to the developers for increasing the rates, resulting in thin profit margins. “However, the low initial capital requirement, coupled with the relatively shorter execution time period, helps in supporting the overall return on capital employed for these projects,” he said.